Question 1

Section A

EventPro is quoting for a one-off festival. The project requires 500 kg of Material Z. EventPro currently has 300 kg of Material Z in inventory, originally bought for $10/kg. Material Z is in regular use by EventPro for other events. The current replacement cost of Material Z is $12/kg, and its scrap value is $8/kg.

What is the relevant cost of Material Z for this one-off festival quote?

Accepted Answer

Determine if the material is in regular use. If yes, the relevant cost is always the current replacement cost, regardless of what is in inventory.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Valuing the existing inventory at scrap value ($8) or historic cost ($10). Scrap value is only relevant if the material has no other use.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA PM — Performance Management Practice Exam 1

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